In 1934, University of Chicago economist Henry C. Simons published a seminal policy pamphlet titled A Positive Program for Laissez Faire. An early leader of the so-called Chicago School of economics, Simons laid out in this short but dense work a series of reforms aimed at rehabilitating a free-market liberal economic order in the United States.

Simons began by noting the grave threats to liberty and democracy posed by the challenges of the Great Depression and the political responses to it. Indeed, A Positive Program was the product of a classical-liberal mind petrified by what could happen in a world in which capitalism and freedom were under siege: “the future of our civilization hangs in balance,” Simons wrote.

He fleshed out his argument in two steps. First, he diagnosed the overarching problems afflicting America’s economic and political systems. Perhaps surprising for a Chicago economist who influenced Milton Friedman and George Stigler, Simons considered monopoly to be foremost among these afflictions: “the great enemy of democracy is monopoly, in all its forms,” he argued, while the “existence of competition … serves to protect the community as a whole and to give an essential flexibility to the economy.”

Simons also fingered government as a major part of the problem. He argued that the state failed to meet its responsibilities in the area of money, harmfully interfered with prices, and was ineffective in maintaining market competition. Most radically, Simons thought government was not doing enough to diminish inequality of power and income.

His second step was to offer a reform program with specific “drastic” policy proposals. He called for the “elimination of private monopoly in all its forms” and the preservation of a competitive order through a heavy dose of government power. This included strict limits on corporations and even “direct government ownership and operation of all industries where competition cannot be made to function effectively as an agency of control.” Less radically and more like the Chicago School economists who would follow him, Simons also called for banking and tariff reform, as well as rules limiting discretion over monetary policy. Finally, Simons—quite illiberally—advocated restrictions on advertising and the use of progressive taxation and redistribution to reduce inequality.

Fast forward to today, and we see another Chicago economist, Luigi Zingales, confronting another economic crisis and likewise trying to put capitalism back on the right path in his book, A Capitalism for the People. The similarities between Simons and Zingales do not stop there. In fact, Zingales’s philippic against the early 21st century’s economic and political trends—including growing income inequality—and in favor of competition over monopoly frequently calls to mind the older Chicago tradition that Simons represented in A Positive Program.

Unlike his predecessor’s, Zingales’s reform measures are far more consistent with the tenets of a free society. In recognizing the danger of bigness—especially big business tied to big government—while hoping to meet the threat with greater respect for markets and freedom, Zingales fuses many of the best parts of the “old” and “new” Chicago Schools.

He begins his positive program with a touching personal expression of what motivated him to join the effort to rescue capitalism and freedom. In short, Zingales did not want the United States to turn into his home country—Italy—with its disabling crony capitalism, something he saw taking root in American finance. So Zingales, a “strong believer in the free-market system, who loves America for what it has always stood for: freedom in the pursuit of happiness,” decided to enter the fray.

A Capitalism for the People is divided into two sections. The first identifies and discusses our ailments, especially the “cancer of crony capitalism” and growing inequality. The second part lays out remedies that can fight these problems before they metastasize.

Zingales starts by explaining that Americans have been and remain exceptionally positive towards capitalism—hence his lingering hope for turning things around. That pro-market attitude is partly due to our continuing belief that rewards and responsibilities should be assigned based on merit and that capitalism accomplishes this to a great extent, when functioning properly. However, for Zingales, “the benefits conferred by meritocratic capitalism are neither as great nor as widespread as they once were” and “this change weakens political support for the market system.” What is most destructive of pro-market sentiment, according to Zingales, is when people believe the system is “rigged.” Enter crony capitalism and the people who thrive off it.

Zingales proceeds to expose the extent to which the American system, especially its financial institutions, has become perverted by cronyism and is less and less cleansed by the forces of competition. He details how the financial system became more concentrated and more politically influential. As businesses in general have grown in power, the result has been a broken system in which corporations and politicians—assisted by well-connected lobbyists—collude to create a “bailout nation” addicted to rent-seeking and averse to real competition.

Of course, the increased size and scope of government spending and regulation only further incentivize businesses and other organized interests to “ask for favors.” Academics are not exempt from Zingales’s criticism, as he warns that they too can be influenced or pressured by business interests rather than serving as beacons of unbiased truths. These things undermine citizens’ trust in both the public and private sectors.

Is there a solution to this collectively suboptimal but often individually rational activity? Zingales thinks the problem can be solved—and without “massive government intervention, which would interfere with economic freedom and suppress growth.” His solution relies instead on a counterintuitive combination of populism (American-style, and thus pro-free-market) and the power of competition.

Zingales focuses on education as an antidote to the increasing inequality that accompanies globalization. Unfortunately, as he points out, “perhaps the most destructive cronyism that uses lobbying to extract money from the American people in exchange for a product that doesn’t meet their real needs is in the public school system.” Sounding a lot like his fellow Chicagoan, Zingales repeats Milton Friedman’s argument for publically funded school vouchers as a means to increase equality of opportunity. He adds the twist that there should be “higher-value vouchers for people who start from less privileged conditions” and “match-specific vouchers” to incentivize good schools to “rescue poorer-performing students at risk.” To allow individuals to take risks and invest in themselves “when the consequences of failure are very harsh,” Zingales also supports a safety net of forgiving bankruptcy laws, unemployment insurance, and job retraining.

Zingales wants to reinvent antitrust, with regulators focusing not just on the economic advantages of mergers but the political consequences that arise from large corporate combinations. Where the political results would likely be “welfare-reducing,” Zingales would have the government prevent such mergers or limit the lobbying those corporations can engage in. As he admits, “This would be a radical departure from the status quo”—indeed, one reminiscent of Simons’s anti-monopoly program. Further steps he recommends to revive a competitive market include better balancing our patent and copyright regime, empowering shareholders in corporate governance (even by quotas), and enacting progressive taxation on corporate lobbying.

He supports a number of other critical institutional reforms to the tax and finance system: simplifying corporate taxes, ending expiring tax provisions, applying legal rules to the government (which creates them in the first place), instituting a reward system for whistleblowers, and increasing data transparency through disclosure requirements. Financial regulation, he says, should be parceled out to three agencies, each responsible for meeting only one key goal: price stability, protection against fraud and abuse, and system stability. Zingales disapproves of using the tax system for “massive” redistribution of wealth and income. Instead, he favors Pigouvian taxes (which “correct distorted incentives”), such as levies on lobbying or on potentially destabilizing short-term debt.

With all of these reforms, Zingales desires simple rules rather than complex ones that invite chicanery—thus, despite the economic arguments against separation of commercial and investment banking, he favors such simple designs as Glass-Steagall.

Unlike many economists, Zingales looks beyond institutions: he also wants to use ethical and social norms to promote positive economic and political change—for example, to buttress the beneficial effects of a lobbying tax through the development of taboos against “unacceptable” lobbying. He advocates using the power of public shaming to promote self-regulation. In this way, “opportunistic actions that are detrimental to society at large” will be less incentive-compatible. He calls on business schools to teach and reward good behavior among their students and alumni. Where these efforts fail to contain voracious corporate lobbying efforts, he proposes using the proceeds from the lobbying tax to support, in effect, the lobbying activities of “diffused interests.”

A Capitalism for the People follows right in the footsteps of A Positive Program. Both highlight the danger bigness and monopoly pose to our political system, not just to economic efficiency. Simons declared early in his work that “political liberty can survive only within an effectively competitive system” since “If the organized economic groups were left to exercise their monopoly powers without political restraint, the result would be a usurpation of sovereignty by these groups—and, perhaps, a domination of the state by them.” Likewise, Zingales argues, “In a socialist economy, the political system controls business; in a crony capitalist system of this kind, business controls the political process. The difference is slim: either way, competition is absent and freedom shrinks.”

Both economists think intellectuals have a special role to play in preserving a liberal order. Simons notes that “The precious measure of political and economic freedom which has been won through centuries may soon be lost irreparably; and it falls properly to economists, as custodians of the great liberal tradition out of which their discipline arose, to point the escape from the chaos of political and economic thought which warns of what impends.” Similarly, Zingales holds that business schools should be “churches of the meritocratic creed” and “frown on behavior that we recognize as detrimental to the long-term survival of the free-market system.”

As for solutions, both favor government “establishing and maintaining effectively competitive conditions in all industries where competition can function as a regulative agency,” as Simons argued. And the two economists share a similar sensibility on anti-trust and monopoly.

Zingales tries to recapture the high ground for capitalism by highlighting competition as the best remedy for the problems identified by the Tea Party and Occupy movements. He argues that the market—assisted by government enforcement of simple rules—is the best means to deliver the public from the anti-competitive clutches of an alliance of big government, big business, big lobbyists. This argument is made more compelling by Zingales’s restatement of Simons’s fear of bigness in all realms and his similar concern for inequality. This will likely make his book better received in many quarters that are unhappy with the rise of crony capitalism and the continuing scourge of rent-seeking but that are usually less friendly to markets.

A key feature of the book is Zingales’s reminder that being pro-market is different from being pro-business. Unfortunately, too many Republicans and conservatives fail to appreciate this distinction, with the result that they unwittingly assist the erosion of public support for capitalism and pro-market politicians.

What’s more, Zingales nicely explains how some policies that are not efficient from a strict economic standpoint may nonetheless be good because of their political consequences. For example, measures reducing the power and concentration of large firms, especially in finance, may not make the most economic sense. Yet they may be optimal for non-economic reasons. It is refreshing to see an economist who appreciates that narrow economic efficiency should not be the only or most important criterion of public policy.

Lastly, Zingales hits a winning note by stressing the role of culture, norms, and ideas—rather than just institutional reform—in social and political change. Although his discussion of these factors reads a bit awkwardly and at times seems incomplete compared to his other proposals, Zingales should be praised for bringing these concepts on stage and encouraging us to think more about them. In fact, the book ends by stressing the importance of “a rediscovery and renewal of the moral foundation of capitalism.

Despite all of these commendable features, Zingales’s book is not without some blemishes. In particular, there are some rather strange policy proposals in the midst of so many well-constructed ones. For example, Zingales’s argument that there should be a progressive tax on corporate lobbying is fine and good. That the proceeds of this tax should be redistributed “to support the arguments of the more diffused interests” is, however, hard to imagine working in practice. Moreover, isn’t Zingales asking for the wolves to pass laws that benefit the sheep?

Zingales’s reform program would certainly make the U.S. a more just and prosperous society. Yet he does not convincingly demonstrate that his ideas will put a dramatic dent in inequality. A meritocratic, globalized, efficient economy is going to yield substantial returns to those with high human capital while leaving behind—justly or otherwise—those without the talents, education, or work ethic required to succeed in such an intensely competitive realm. If Zingales is correct that Americans will largely support a system that produces inequality as long as they perceive that the economic rewards are distributed according to merit, then his program might be enough to head off any social instability. But his program will do little to keep those who think that the only fair system is one that more vigorously distributes wealth from occupying Wall Street and trying to enforce such a system in the halls of power.

Those qualms aside, Zingales offers a refreshing and improved program for saving capitalism that harkens back to two older Chicago traditions. And hopefully it will stimulate as much discussion as they did.

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22 Responses to Capitalist Cure

I agree with the idea of free market vs. pro business. Just like the US right wing have industries such as oil and weapons, the left wing have healthcare and the green industries, both sides are clearly pro business but neither are pro free markets. Being “pro business” simply means being pro big government and all the usual corruption that goes with it

“What is most destructive of pro-market sentiment, according to Zingales, is when people believe the system is “rigged.” Enter crony capitalism and the people who thrive off it.”

I would argue that the most dangerous threat to pro-market sentiment is not cronyism per say. Rather it is that cronyism is not seen as such, with people on both the left and right confating free markets with cronyism, if they recognize cronyism at all.

How do you convince a group of people who oppose competition at every turn that competition is what we need to restore our economy?

Trade unions, teachers unions, two “choices” for politics, opposition to private sector solutions to various problems, teaching kids that competition is harmful and that everyone is a winner.

All of these are aspects that will, going into the future, slowly destroy the idea of competition and reduce us all to being dependent on the strongest among us for our economic, if not physical security.

We are no longer a competitive people, nor do we want to be. We view challenges as obstacles rather than opportunities. We have stunted evolutionarily and we will soon fade into irrelevance as a nation and as a people.

Thankfully, at least the Chinese are pretty darn competitive, so they can carry the flame for humanity into the future. I’m not sure how well Americans will adapt to living under that sort of government though, but the direction we’re going, we’re probably only a few decades away from being their twin.

But it sounds like an interesting read. Unless, there are provisions that address the severing of the market/financial industries from Congress, i.e., lected officials divesting themselves of all stock and market bsed incomes, there remains a huge loophole by which unfair market practices will continue.

Sometimes a review includes enough to comment on a polict initiative but, in this instance, my comments are in the blind not having read the book.

This is very smart, and I suspect Zingales’s pro-capitalist anti-elitism will be the direction the Republican Party goes in the next few years. Although liberals are accustomed to thinking their party is the anti-privilege standard-bearer, the Republican Party is better positioned for a jeremiad against the Powers That Be, because they’re the ones eating locusts in the political wilderness.

Roderick Long makes a convincing case that libertarians have a significant opportunity to win over “the anti-privilege left” — that is, leftists who worry primarily about the accumulation of unjust power. Right-wingers have long argued that government intervention in the economy can actually perpetuate “privilege,” but young liberals have been reluctant to adopt these ideas because these arguments were often made via racialist rhetoric, or by Republican politicians who were obviously socially backward in some other way. But now that electoral demographics are forcing the Republican Party to moderate on racial and other social issues, this is unlikely to remain a problem for long. Republicans will soon be able to make anti-government arguments without seeming like crypto-supremacists, and they’ll find these arguments to be very potent.

I’m 27, and my young liberal friends are extremely worried about the economic and military-industrial interests that are apparently permanent fixtures in Washington. Because Democrats enjoy a clear systemic advantage in electoral politics (aside from Republican gerrymandering that will be moot in a few years), the Democratic Party can be expected to fuse tighter to these established elite interests. So if Republicans take anti-establishment tacks on issues like drone wars and marijuana prohibition while emphasizing how centralization of economic power hurts the little guy, they should be able to peel off many voters long considered the Democrats have long taken for granted.

“But his program will do little to keep those who think that the only fair system is one that more vigorously distributes wealth from occupying Wall Street and trying to enforce such a system in the halls of power.”

That’s assuming that most people are doing that because that’s all they believe in. He is correct that the hated for Wall Street and free markets is less about some selfish ploy to ‘make a system that’s best for ME’ and more about simple disillusionment. In essence, the Left, including Occupiers, see Big Business the way the Right and the Tea Party see Big Government. Zingales’ argument is that the cronyism that both Biggies are pushing causes the public to turn against both. Essentually, Cronyism causes Libertarians to tear down government, whether good or ill, while the same force causes Liberals to tear down business, whether good or ill. You can even flip one of the paragraphs to fit the issues with Liberalism:

A key feature of the book is Zingales’s reminder that being pro-regulation is different from being pro-government. Unfortunately, too many Democrats and liberals fail to appreciate this distinction, with the result that they unwittingly assist the erosion of public support for pro-regulatory politicians.

Many conservative ‘pro-market’ ideals help the very corrupt corporations that dismantle natural capitalism and sour the very term ‘capitalism’ in the eyes of the public. The same is true for liberals who’s ideas create the Largess of government that ruins it’s proper purpose and, thus, turns people to hate them.

Note that the public isn’t so much “Running towards goverment” as they are “running away”. People ran from bush in 08, they ran from Obama in 10, and they just either chose to run from whatever they feared in 08 or feared everything and ran home. Even the ‘big issue with Republicans’ is just a mass fleeing from Bush. America hasn’t turned Liberal.. it’s turned either apathetic or panic stricken.

That’s why the solution involves actions that seem ‘silly’ but make the public feel good. FDIC doesn’t stop a bank from dying to a run, and many don’t know what FDIC is, but they know that ‘your money is safe’ so the public accepts banking institutions. On the other hand, while placing fees may make sense for a bank, but when multiple large ones do that, the impression ‘your money may become our money when we want’ comes in.

And honestly, if credit unions weren’t able to show themselves are ‘not a bank’ then my money would probably be in a mattress, which isn’t going to help the economy at all.

Basically, the people solution is crafting policies that look at the psychological side of things. It may show an issue of, say, the EIC, which doesn’t make people feel better about their income as, to many, it’s a big check that’s spent in a flash, then back to being broke. When people feel better about their survival by getting a $300 check every month rather than $5000 a year, you realize you have to throw away the economic book when it comes to public appeal.

but public appeal is what puts pause to the Tea Party riots and Occupy sessions. Combine it with the reforms said above and you have a government and market in working order and a public willing to ‘buy into’ both.

Btw, someone willing to identify what sort of mentality that is, because I’d think I’d like to join it. It’s ideas that I either agreed with or ones I wish I knew about for a long time.

“his is very smart, and I suspect Zingales’s pro-capitalist anti-elitism will be the direction the Republican Party goes in the next few years. Although liberals are accustomed to thinking their party is the anti-privilege standard-bearer, the Republican Party is better positioned for a jeremiad against the Powers That Be, because they’re the ones eating locusts in the political wilderness.”

Republicans ARE in the best place to support this. It’s like a Libertarian that says “I get it, Big Business sucks too” that Liberals have been screaming at. It doesn’t sound very conservative, though, since it is anti elite and, to use the joke “Conservatives think everyone can become the 1%”.

It probably explains why I’m here, hoping Republicans would get their act together, rather than trying to correct the issues with the Democratic party.

This is the type of thinking that needs to go on within the Republican Party. It is interesting that both versions of the “Chicago tradition” come to light after the excesses of financialization and crony capitalism are reflected in the resulting Great Depression and Great Recession. Sometimes it takes a dose of realism to understand the free market isn’t really free, and simple, easy to understand regulation and transparency are proponents of effective Capitalism, not the enemy. The more opaque and complex the system, the more availability to seek rent. I think you can get a large majority of people to agree to the premise that simplification is a key element, not of fairness, but at least a more equitable shot at success. Most people are not looking for a handout. Most people don’t want to be dependent upon any system. Most people just want to feel like they have the opportunity to chase the ideal of life, liberty, and the persuit of happiness. Not having to work against a deck stacked against them is a good place to start.

Of course not having read the book — just how one justifies breaking up an corporate entity without first demostrating that have violated the law/the constitution is a puzzle to me.

And if you intend on maintaining the plutocracy or the unfair meritocracy — by what mechanism do you redistribute wealth and beyond a claim of fairness, it seems one must demonstrate that unfairness is a construction as opposed to a roll of the dice.

Well, corporations are creations of the government, they are merely artifical constructs created under the power of the law. So long as they are considered “persons”, then the 5th Amendment would apply to them.

I believe that much of the issues we’ve faced when it comes to just capitalism versus crony capitalism could be alleviated by making it clear that corporations are not persons as envisioned in the Constitution, no more than any government created entity is a “person”. The DoD isn’t a person, the local water board isn’t a “person”, the transportation authority isn’t a “person”, nor is the local school district. These are all entities created by government law, and likewise, can be abolished by government law.

For some reason, corporations are not subject to the same sort of situation. Personally, I blame Santa Clara v. Southern Pacific and the fact that they law clerk’s note on that case has never been challenged.

A companion to this book would be John Ralston Saul’s The Unconscious Civilization, which is an account of the shift from democracy (primacy of the individual) to corporatism (primacy of the group or ideology).

“The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject, or vendible commodity, which endures after the labour is past, and for which an equal quantity of labour could afterwards be procured.” (Adam Smith, quoted in Saul)

Or, as Saul puts it, “The technocracy has developed an argument that now dominates our society according to which “management” equals “doing,” in the sense that “doing” equals “making.”"

I shall put Zingales’ book on my wish list. Although it looks promising to have some fresh ideas, some real intellectual leadership coming from that angle, I am not persuaded that “competition” is the answer to every social and/or economic question.

For example, competition is a gigantic fail in areas like healthcare. Is there anyone who would seriously shop doctors on price? How do you choose the hospital in which to have a serious surgery? The costs of medical care are directly proportional to the level of competition — the more competition, the higher the costs. Medical outlets like hospitals and clinics compete on technology; the newer and more expensive technology, the more attractive to consumers; and the high per patient charges.

America has tried the Republican “cut spending, cut taxes, and cut ‘entitlements’” and the Democrat “protect ‘entitlements,’ provide tax-payer supported stimulus, lower middle and working class taxes, tax the rich and redistribute” brands of economic policy, as well as a mixture of both. Republican ideology aims to revive hard-nosed laissez-faire appeals to hard-core conservatives but ignores the relevancy of healing the economy and halting the steady disintegration of the middle class and working poor.

Some conservative thinkers have acknowledged the damaging results of a laissez-faire ideology, which furthers the concentration of productive capital ownership. They are floundering in search of alternative thinking as they acknowledge the negative economic and social realities resulting from greed capitalism. This acknowledgment encompasses the realization that the troubling economic and social trends (global capitalism, free-trade doctrine, tectonic shifts in the technologies of production and the steady off-loading of American manufacturing and jobs) caused by continued concentrated ownership of productive capital will threaten the stability of contemporary liberal democracies and dethrone democratic ideology as it is now understood.

Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status.

Economic democracy has yet to be tried. We are absent a national discussion of where consumers earn the money to buy products and services and the nature of capital ownership, and instead argue about policies to redistribute income or not to redistribute income. If Americans do not demand that the contenders for the office of the presidency of the United States, the Senate, and the Congress address these issues, we will have wasted the opportunity to steer the American economy in a direction that will broaden affluence. We have adequate resources, adequate knowhow, and adequate manpower to produce general affluence, but we need as a society to properly and efficiently manage these resources while protecting and enhancing the environment so that our productive capital capability is sustainable and renewable. Such issues are the proper concern of government because of the human damage inflicted on our social fabric as well as to economic growth in which every citizen is fairly included in the American dream.

“For example, competition is a gigantic fail in areas like healthcare. Is there anyone who would seriously shop doctors on price? How do you choose the hospital in which to have a serious surgery? The costs of medical care are directly proportional to the level of competition — the more competition, the higher the costs. Medical outlets like hospitals and clinics compete on technology; the newer and more expensive technology, the more attractive to consumers; and the high per patient charges.”

I can give a few examples on that. firstly, there are times when the hospital you choose is made before the emergency. Pregnancy is one of them. That’s not getting into the idea that, once it becomes possible to compare hospitals on price, that people would be more willing to, say, choose a primary doctor based on their hospital affiliation.

That it won’t affect the ‘I’m dying and need help now!” cases, that’s ok. Gas stations can have varied prices since some people can calmly choose on price, others just pick whatever is there, and some are below the E and just want SOMETHING.

lastly, note that price isn’t the only competition factor. If the public sees the price and still opts for the higher option due to the features inside, then they still made their choice. The issue now is that the choice isn’t allowed to us at all.

As far as ‘competition is the key’ I don’t think the author is making that claim, though I’m also going off of not reading the book. by the sounds of it, the author is using competition less as a solution and more of a sign of health. He believes that a healthy system is one with high competition that’s driving the economy. However, forces can get strong enough via either governmental or business realms to tear the system down for their benefit. Loss of competition then becomes the sign to show that something is wrong.

If we could make changes to the ground rules such that the “pre” distribution of economic gains are more equitable, my appetite for redistribution would wane.

Breaking up large businesses might accomplish this… though I have to wonder if it would in part by making them less efficient. The problem with that is the question of international competition, which is already a problem for us. I see that Mr. Zingales acknowledges this, and presents potentially inefficiencies as a price worth paying.

The basic idea here seems to be an assault on privilege using free market ideals. I like it, but forgive me if I don’t expect this to happen. I see Conservatism as mostly an attempt to protect privilege, and so I can’t see this taking off on the Right. I’d be very pleased to be wrong.

Also, I just don’t believe that the “natural” state of laissez-faire capitalism results in large middle class. I think the natural state of capitalism is a tiny group of owners who gain control of pretty much everything, a small middle class and a very large underclass. I think a large middle class is an artificial creation that requires care & feeding. I could be wrong, but looking at History, that’s what I see.

To be fair, Mr. Zingales appears to want to provide some care & feeding via policies designed to help social mobility: school vouchers that are more generous for people of limited means, job re-training programs, UI, etc. Which isn’t exactly laissez-faire, but I don’t mind

Having read the book, I can say that it is well worth the read and I hope that many Americans do read it. I think it is far from perfect- Zingales favors yet too much taxation and regulation for my taste (and for the market to truly flourish and be free from cronyism), but his reforms would be a HUGE step in the right direction. I particularly hope that GOP members read it and begin taking up the pro-market, not pro-business, “populist” creed. The only way for the GOP to come back is by becoming anti-establishment. Making the case for competition, rather than big business, would do it.

With my version of ADHD I got through about half of the article. But even at that, there’s a lot there, and I could see that there were a LOT of great ideas in it. Unfortunately, there is a problem of sequence here. I.e., these ideas will only work when the problems of government, legislation, and I think public dialogue have been solved first. It just doesn’t work anymore to tout “The Constitution”. It’s a dinosaur and an oxymoron, just something for lawyers and the greedy (perhaps a really large percentage of the people in reality, though less so ideologically) to figure out ways to circumvent and misinterpret for self-serving purposes. Take any three or four of Zingales ideas, and imagine, given the three branches of government working at odds with each other AND shifting balance of power every decade or two, just how long it would take to institute (without subsequent undoing) those ideas into the workings of government, commerce, the law, etc. No, no matter how sharp these ideas (and I believe many economists have really good ideas to fix the economy), it’s the process of government, elections, public dialogue, etc. that needs to be fixed first.

For all of the talk of cronyism and lobbyists, and how government works or doesn’t work, people forget the biggest driving force: the public.Well, some forget, which is the problem.

Essentually, cronys don’t vote in their own people. They convince the public to vote in their guys. They convince the public when government is the answer and when it’s not. Then they convince everyone that the public has no power so that no one bothers to repeat the same steps.

Yes, day by day, you can see examples of some group working against the public interest and getting away with it, but when you look at the big picture and get away from small circles like here, the fact becomes clear: This is the country we “the people’ created, allowed, and..well.. asked for.

It really is the sad part about systems like ours. We can’t blame a King or a Czar. We can’t really, truly say that we’ve really argued, as an entire group, against anything government did and didn’t get it eventually, even if it hurt us. Even if we later said “Wait, we don’ want this”

If the public was in support of this measure, even with i making the changes that it demands, it will, eventually, be attempted. There’s a small time elite right now thinking of how to become ‘rich’ by the topple of the ‘old elite’ and the rise of this system, and once they know this is a ‘thing’ they’ll push. There’s no such thing as a system that someone can’t abuse for their benefit.

That’s not decrying this work: just showing how even a system that benefits this country and everyone in it will have it’s ‘shadow powers’ to keep it going. Some may even be the ones we rage against now. The idea is never getting rid of the bugs that grow in your garden: it’s making sure the ones that do either help your garden or at least don’t bother it.

Long winded as usual: To sum it up. don’t fear the cronies and the Powers That Be.

Start with the people. Get public support. Keep it and get it into an assumed mindset.

Then wait until someone with power spots the opportunity and uses it to topple the current Powers.

Wash and repeat until the Powers That Now Be support the ideas you implanted in the public.

I agree with Gary Reber. This wing of the Chicago School is welcome to join us, the Coalition for Capital Homesteading. As you know, in this country we now create money when the Fed loans it to banks, who use fractional reserve banking rules to loan it out multiple times, contributing to boom and bust cycles. With Capital Homesteading, real production-backed currency would be created by loaning it to citizens, who must put it in a retirement account and invest in dividend-paying corporations. The best way to reduce monopolies and shrink government is to empower all citizens to participate in a growing economy. Our shrinking middle class is falling victim to a flawed system with technological unemployment, cronyism, corruption, socialism, and concentration of capital. Change the game in a way that both liberals and conservatives can support.

Here is a suggestion: make all directors and managers of corporations absolutely liable financially and otherwise for the activities of the corporation, without recourse to insurance, and remove the protection of limited liability from shares held by one corporation in another. I think this would begin to unravel the oligopolies, more might be needed. As for banks, well Rothbard and Heurta de Soto have said all there is to say on that subject. As is mentioned above corporations are creatures of law and must be bound by law.

How can any Republican candidate in the near- to medium-term hope to plausibly cast himself (repeat: himself) as a populist enemy of privelege, when the party is so deeply and firmly wedded to the likes of Sheldon Adelson, Karl Rove, Rush Limbaugh, Charles and David Koch, Donald Trump – and not to mention the lasting legacies of Cheney and Bush? Like many millions of young Americans, I came of age during the Bush years, a man the very archetype of privelege and elitism, in particular a man who avoided armed service yet launched two wars, the latter of which in the popular imagination was purely at the behest of his oilmen benefactors. Like many millions of young Americans, who have a lifetime of voting ahead of them, the Republican Party is irrevocably associated with the Divine Right of Capital, and it will take far more than a sweet-talking candidate to make a dent in this image. It will take a revolution within the party to change this.

I see much promise in these proposals and look forward to reading this book. Putting aside the hard core socialists on the left, which I view as realistically a small minority of the Democratic Party, a substantial number of Democrats in my circles are more anti-big-business than they are pro-state. In the US two-party duopoly, they are forced into the pro-state party, and I suspect that a large reason for this is the feeling that, having to choose between a camp motivated by profit and a camp motivated (ostensibly) by the public good, they will choose the lesser of two evils — the supposedly pro-public good state. (Indeed, if you look at American history, the state has grown in response to the corporation, as Americans have demanded, rightfully or wrongfully, protection from the exactions of Big Business.)

I strongly believe, however, that there is a very large slice of the Democratic Party that is, more than anything, pro-market in the sense discussed here. That means, pro-regulation where it creates better markets, pro-market where the market does things better than government, pro-government where it does things better than markets. I see a pragmatism and a desire for efficiency more than anything else at work amongst these people.

I am not so confident that either party is capable of throwing off the shackles of its corporate funders and returning to a truly pro-market ideal. I have argued in these comment sections elsewhere that, until we reform the redistricting and primary systems, we will all have our choices made for us by the extremes of the body politic and the big union and corporate money. Only a real third party, premised on an opposition to bigness in all its private and public forms can hope to carry this message forward. Perhaps we should call it the (Andrew) Jacksonian Party.

Income/wealth inequality isn’t a real problem, that notion is rooted in a false zero-sum view of the economy — most of the wealth around today was newly created over the last 50 years, and your neighbor getting richer doesn’t actually make you poorer. Consumption inequality is a bit more logical (and fun to get angry about) but it doesn’t really matter much (esp. if you look at absolute consumption levels over time, which are always rising for all quintiles). In a discussion of inequality, the focus needs to be on production inequality — consumption has always been limited by available production, since the first humans started making food and tools.

In other words, if we care about living standards, rather than complaining that some people/countries/communities are being way too productive (rent-seeking aside, everyone agrees that’s bad) we should be asking why the poor are not becoming more productive (in the sense of actual contributions, not just measures of “worker productivity” which are largely governed by capital inputs). Unfortunately that gets into very uncomfortable questions about culture and choice, and as a society we don’t seem to be able to handle that debate very well — the notion that poor people are choosing to be happy rather than productive, and thereby making society poorer, is one that people just do not want to face. It’s much easier to think of the poor as victims of… something or other… even if their consumption is rising faster than their contribution to production.

But as we get richer as a society, the marginal incentives to produce get smaller and smaller — who wants to work 70-100 hour work weeks in a world that has so much wonderful utility to consume? Personally I think one would have to be have an ambition verging on mental illness to want to be a CEO these days. Maybe we should be asking rather “how free do we want to be, to let people decide how rich or poor they will be?”